Audiences Up, Revenues Down

A reoccurring theme that's been happening as I visit radio stations:  someone brings up morale and cites the fact that their company mandated across the board staff pay cuts after the financial collapse of 2007-2008, complaining that those reductions have still not been restored.

As a partner in a small business that has grown in that difficult environment, I always try to explain the economy and help them understand what a huge toll the downturn continues to take on everyone except the very highest earners.

The more specific and detailed I get, I see eyes glaze over.  I suppose that's why Thomas Carlyle called economics the dismal science.

For that reason, I want to congratulate Country Aircheck in their annual June print edition for again tabbing country format ratings and revenues for three pages of charts/trends for the last decade from BIA/Kelsey (click for an invitation to their latest webinar on the subject) even down to specific dollar and audience share data on 274 country radio stations and 17 group owners.

I worry that those pages, which explain it all in undeniable numbers, will be the least read section of the always-fascinating publication.

If you care about your career future and the state of American business, start with this chart but really spend some time with the numbers of stations you know a lot about.

We are not out of the woods yet and if you think it's only your radio station that is affected in this way, make a visit to your local Chamber Of Commerce, a trusted realtor or hometown bank manager.

More On Radio's Strengths Vs Pandora's Weaknesses

Jeff Vidler's Vision Critical research on Pandora users' use of and opinions about broadcast radio should serve as a wake up call for broadcast audio (the service formerly known as "radio").

Michael O'Malley highlighted with a red circle yesterday what we need to do in order to keep things that way.

 And, they expect us to do those same things on every digital platform.

Business cycles teach lessons, and what we're going through right now isn't new.

The courageous invest to gain market share when others are cutting back.

Canada Radio Revenues Up 4%; Jobs Up 4.7%

Yesterday, the Canadian Radio-television and Telecommunications Commission (CRTC) released statistical and financial information on the 669 commercial radio stations operating in Canada.  

Revenues, according for the report from Ottawa, for the broadcast year ended August 31, 2011, increased by approximately 4% over the previous year, demonstrating steady growth and continued confidence in an industry whose revenues are now back to pre-recession levels.

While total revenues for AM and FM stations increased from $1.55 billion in 2010 to $1.6 billion in 2011, expenses also rose from $1.21 billion to $1.26 billion during the same period. As a result, profits before interest and taxes (PBIT) climbed from $298.3 million to $311 million, and the PBIT margin went from 19.2% to 19.3%. 

In 2011, commercial radio stations employed 10,576 people and paid a total of $676.3 million in salaries, an increase of 4.7% from last year when they employed 10,104 people and paid $640.7 million in salaries.

I have worked both sides of the 49th parallel for the better part of three decades and can report to A&O's American clients that no one studies what happens in the USA more carefully than Canadians do, whole most of us are oblivious to Canadian economy and politics.

There are few decisions in A&O's business history as good as having decided to work in Canada.

Like Earl Pitts has always said:  "Wake Up America." 

It's time for U.S. radio companies to look carefully at what Canadian radio has been doing.

Interesting Times

For example..

1. A fast-growing ownership group learned yesterday from Miller-Kaplan that they have gone - in just four years - from buying a market's lowest-billing cluster to becoming that city's top-biller in 2011, but still had to work with their lenders to enter bankruptcy because they had the bad timing to have purchased the stations the year before the financial crash of '08.

Going from worst to first in revenues was still not enough to pay the bankers, who - thankfully - cooperated in the restructuring.

2. A longtime major market programmer and air talent who went into music promotion a few years ago lost his job this week when his label owners eliminated their entire promotion staff.

I told him about an on air position with a great company that just opened, but he declined my offer of a recommendation, preferring to continue to pursue work in the record business.

At least he knows where his passion lives and when times are tough, that's the name of the game.

3. Toby Keith's "Red Solo Cup" has sold 1,023,617 digital tracks since its release (ranking #1 again in sales), as almost every single track on this week's digital downloads chart is down roughly 40% from the previous sales week.

Given the state of the economy, I guess we all could use a drink and a good laugh.

History

Clear Channel CEO Bob Pittman seems to be at every broadcast meeting and in every trade publication putting a positive spin on the wrenching changes affecting local radio service as the era of consolidation which started 15 years ago with high price mergers and acquisitions has culminated in massive junk bond debt.

Pittman showed a chart with competing media revenue adjusted for usage, in an ideal world. Newspapers would get much less of the advertising pie, TV stations would get somewhat less, and radio's take would mushroom from about $15 billion to $38.1 billion. Pittman says it's crucial for radio to "make new revenue to the radio sector our priority." And he has this advice, as a former radio programmer and executive now returned to the business: "Don't badmouth your own industry."

I admire Bob for taking on the immense task before him and hope he's successful, for the same reason I hope that Europe is able to find a way through the Ireland, Greece, Portugal, Italy (etc, etc) financial mess.

If they can't fix the real problem, we're all going to see it at our local bank branch and in our retirement accounts.

So, the hyperbole spinning reductions in force not being about cutbacks, but about reinventing radio's local relevancy reminds me of 1998 when Randy Michaels was trying to motivate the Clear Channel of that time and, just like Pittman is today, the rest of the industry as well.

I'm not sure the downsized folks bought it then and today people like me who lived through that history now hope that Pittman, as with Cumulus' executives see things as they really are, not like they wish they would be.

They are managing toxic assets.

The problem is excessive debt and there's not enough revenue in new media to solve it in the time frame available.

While it's very nice to hear Pittman's optimistic speeches about radio's value (and I agree with him that we need to be positive about the efficiency and effectiveness of radio) the cuts that he's been forced by reality to implement throughout his company are rippling through our entire industry and are equally essential.

Saving an upside-down business in a low-growth economy requires brutal honesty and hard choices.

It's about survival.

Leadership means telling harsh truths, whether in business or politics.

I hope we're all ready for it.

Things Are Looking UP For Retailers

Big Research: Those of us on the “nice” list may be getting an extra special surprise under the tree this year, as purchase intentions for several big ticket items – including autos, computers, mobile devices, and TVs – are on the rise this year compared to last.

What’s NOT hot? "While more popular among young women, virtual pinboard Pinterest doesn’t seem to be generating much interest among the public at large."

From Bad to Poor and Everything in Between

What one word best describes the economy? 1.6% call it "hopeful."

If you said something like bad, sucks, poor, terrible or depressing, you’d be right in line with the top 5 descriptions, according to the latest American Pulse™. 6,059 respondents participated in the 2nd October American Pulse conducted 10/25-10/26/2011.

The latest results show that very few Americans have positive things to say about the economy. Many say their standard of living has dropped, most would support tax system reform and the majority thinks the government needs to spend less to get the economy back on track.

For Example

A reader emailed me this morning, asking what I meant when I said:

"You’d experiment with new sounds which excite you so as to gain an edge over other radio stations your target might also spend time with."

... in yesterday's post. Here's an example, on the air right now at many A&O client stations, in spite of the concerns pro/con whether new artists like Tyler Dickerson's opportunity closed with Disney's announcement closing his Nashville label last week.

I think he has an impressive debut LP and on it is a very clever track that could not be more topical right now, "Save A Few Billion For Us," so we created a special "economy mix" of the song (click to listen, right click and "save as" to download it) to build some fun and buzz.

If you like it, feel free to download and spin it. Gettin' viral is what it's all about!

I'd love to know if you use it, how it goes and would love to hear what original musical fun-makers you invent for your listeners as well.

Surprise! The Super Bowl Was Hot

With a record number tuning in for the Saints/Colts turf war early in the month, it should come as no surprise that Super Bowl XLIV ranked #1 in Big Research's list of What’s Hot this month.

Sandra Bullock and Valentine’s Day fared well, too. Tim Burton’s Alice in Wonderland and the Apple iPad are highly anticipated among those under 35, while men 35+ are gearing up for the Daytona 500.

What’s Not?

Although fairly popular with the under 35 crowd, 80.8% of consumers are waiting for the cast of Jersey Shore to take their trite talk and tacky spray tans off the airwaves.

Hot: Google And "Flash Forward;" Not: Snuggies And Holiday Spending

Big Research tracks consumer trends and reports:

Hot:

Google (with 74.5% rating it “hot”) bests Bing (39.5%) in the battle of search engines. And, while FlashForward is highly rated among consumers overall, Community has found a niche with young men and young women enjoy The Vampire Diaries. That same female 18-34 demographic declares plaid clothing and over-the-knee boots as on-trend this season.

Not:

While one in four (27.9%) admits to loving Snuggies, this figure-obliterating, Gumby-like fleece sack is particularly out of favor with men…wonder why?

An Encouraging Sign in Our Economy Too

The dollar is stronger against the Euro, Ben Bernanke says the recession is over, and I just received an email from a radio job warrior that gives me as much hope as I have had in some time too:

"Sorry I haven't been in touch lately with a lot of you. It's been a crazy 9 months to say the least.

Thought I would update everyone on everything going on.

As most of you know I got laid off from Cumulus Media back in Febuary. Since then things have been a blur.

I took a job working for Target. But, as you know radio is my passion and where my heart is. It's all I've really done since I've been 16.

In June a new country radio station signed on locally and wanted me to come work for them. It just kinda fell in my lap from a former radio colleague!

I'm the afternoon guy, production guy, program director, music director and also will be doing some sales on the side too.

So, I wear many hats but I'm loving it. It's a locally owned station.

The owners used to own 5 radio stations here before selling them to Clear Channel in 2003.

Now, they are back in the business and only own this station. It's great seeing the owners once a week and being a part of a locally owned station again and in a small market.

I put my condo on the market on August 1st and it sold in less than 30 days. God sure had a plan for me.

I've just found a place to rent.

Everything has happened so fast but thought I would update you."

Cat Country Pensacola Joins SWA Jobs Campaign

Cat Country 98.7's TV spots for the Gulf Coast's Pledge Luv campaign, Tweeted by @brentlanecat @danacervantes and Pensacola LUV's @Southwestair, which is where I got wind of it! (click to watch the video)

Powerful, Optimistic

You know it's not an accident that Radio Ink's 40 Power People Of 2009 are also very high on our business:

Don Benson: The business definitely has changed from the past, there are encouraging opportunities for us ahead as well. New media is one of them, giving us the ability to provide multi-platform solutions for our clients.

David Landau: The ability to place your message in front of such large audiences and at the same time leverage local relationships and communities is unparalleled. It is this connection that will help drive new media opportunities and traffic to new media outlets.

Gary Stone: This combination of reach and engagement makes radio a very effective medium for advertisers.

Bob Neil: Our audience is growing, we’re a highly targetable medium, and we deliver results for advertisers that understand how to use us. Our digital assets are enormous. When you include streaming, podcasting, and other interactive tools, we bring those same sets of assets over from the over-the-air broadcast to the Internet. Our audiences are engaged with our brands, and that’s the perfect atmosphere for an advertiser.

George Beasley: The fact that nearly all broadcasters, Beasley included, now have members of management solely devoted to developing and deriving new revenue streams from new media channels, speaks to radio's commitment to the world of new media.

Mark Masters: Dollar for dollar, radio still brings the best bang for the buck, but people don't realize this on the level they should. If the creative is spot-on and radio reps help their clients focus on use of easy-to-remember website names or phone numbers, ROI is amazingly strong. But this requires radio sales folks to think entrepreneurially, to care about their clients' ROI -- and when this happens, you get renewals. Renewals mean sustainability.

Big Research Tracking: "Day Trips" Are Hot This Summer

81.6% of consumers surveyed say they are looking to trim their vacation budgets while indulging in a little summer fun name day trips as what’s hot in June.

Outdoor entertainment was a hot topic as well, with beach vacations (66.4%), camping (64.8%), and backyard firepits (63.6%) also rating highly.

Twitter is all the rage among those 35+ (hmm…have the younger, trendier crowds moved on already?!), while young men are all about Conan O’Brien and Megan Fox, likely for vastly different reasons.

What’s Not? Hawaiian shirts…keep those lei-ing in the bottom of your dresser drawer this season (unless you're KSON/San Diego PD John Marks who has been wearing them to work every day whether survey says they're hot or cool for many decades).

The Fall of the Mall

What does a recession look like? (click to view it interactively) The New York Times created two maps of a theoretical mall, giving a view as seen through retail sales.

Only Burger King, Denny's and Family Dollar (oops, I have now corrected my previous post, mis-stating that it was Abercrombie & Fitch - thinking that folks still need duds - after "anonymous" pointed out my error, as commented below) are in the "green (or even better, yellow)."

Ad-ology: Advertise Or Die

According to a new Ad-ology Research study, more than 48% of U.S. adults believe that a lack of advertising by a retail store, bank or auto dealership during a recession indicates the business must be struggling.

Conversely, a vast majority perceives businesses that continue to advertise as being competitive or committed to doing business.

Ranking low in the key findings, the word "radio," (".. TV, newspaper, direct mail, and Internet top local media from which consumers saw/heard an ad within the last 30 days that led them to take action.."

Is it that these respondents simply don't realize at the conscious level that radio's ads impact them? Or, do they want our ads and offers to be more easily searchable online and on mobile devices? I'd bet it's both of the above.

Meanwhile...

* 40% of consumers use coupons more now than a year ago
* Most consumers are as willing or more willing to pay more for ‘healthy' or ‘organic' products than they were a year ago
* A ‘deeply discounted price' was the number-one factor that would make consumers more likely to purchase a big-ticket item (+$1,000)
* Store Web sites ranked second only to search engines as the way consumers research products and shop online

I didn't like that they seem to have short-changed radio's ability to influence, but do love this conclusion of the study, as C. Lee Smith, president and CEO of Ad-ology Research, says "It is critical to advertise in the current economic climate, to maintain long-term positive consumer perception of your brand... advertising... assures consumers of a business' reliability... "

There Are Many Reasons I Read "The Main Street Tattler" Each Week

.. not the least of which is Tom Kay's sensibilities when it comes to cartoons in every issue!

Green Shoots

Despite the rising unemployment rate, tempering pump prices and the 8K+ DJIA appear to be bolstering consumer sentiment in May…nearly one in three (31.2%) consumers is confident/very confident in chances for a strong economy over the next six months, rising five points from April (26.0%), nearly 12 points from a year ago (19.5%) and the highest reading since January ’08 (33.5%).

If They Can't Make A Profit In New Media, Who Can?

From Broadcast Dialogue: Credit Suisse says Google will lose $470-million U.S. on the video-sharing site this year alone.

If that figure is even close, YouTube, which Google bought in 2006, is in big trouble because, as one competitor admitted, user-generated content is proving to be a financial albatross: They haven't made the “ton of money” the tech evangelists said they would.

BD's Howard Christensen: "The content that seems to do best online is the same stuff that did well offline -- content produced by professionals. YouTube makes newspapers look like the smart place to put your cash."

Listeners Are Smart, So A PD Has To Be Smarter (Or Try To Be)

Reid Morgan, PD for Jim Pattison's Country 95/B93 combo in Lethbridge writes: We are airing some "buy local" spots and one of them talks about the "multiplier effect" with the formula number being 8.

So, a U of L economics professor contacts me and wants to know how we came up with the number 8. They were actually working on it in one of her classes trying to figure out our formula. (Imagine a university class discussing/debating a radio ad on Country 95, nice) I emailed what I could find and here is her response. (both below)

Dear XXX, The marginal propensity to consume (MPC) is equal to ΔC / ΔY, where ΔC is change in consumption, and ΔY is change in income. If consumption increases by eighty cents for each additional dollar of income, then MPC is equal to 0.8 / 1 = 0.8.

The expenditure multiplier is the ratio of the change in total output induced by an autonomous expenditure change.
 

 -- Reid Morgan, CRM
Director of Programming
CHLB-FM, CJBZ-FM

2. Thank you so much so sending this to me Reid. Now here we go….this is in fact Keynesian ‘s model, HOWEVER, this is his simple model with very strict assumptions that does not exist in the real world.

First, this is assuming we live in a world that has NO taxes, now that would be nice, no income tax, no property taxes, no excise tax i.e. gas, alcohol or cigarette taxes, no sales tax and NO GST. The Consumption function looks like this C = Co + mpc(Y –T), where Co is the amount of consumer spending you do that does NOT depend on your income, mpc you have correct, but you are multiplying it by Y which is national income, not after tax income.

Yd = Y – T, which is consumer household after tax disposable income. T = stands for total tax revenue, that takes into account all taxes collected by the government, a simple version of this is T = T0 + tY, where t is the propitiate income tax Canadian’s pay, and T0 is all other taxes., again this is over simplified.

Therefore, C = C0 + mpc{Y –(T0 + tY)} = C0 –mpcT0 + {mpc(1-t)}Y

Second, Canadians buy imported goods on a daily basis, consider a banana, that is an imported good, and goes not increase Canada’s GDP(Income), therefore you must take this into account for the multiplier.

Now NX = X – IM = X – {IM0 + mpi(Y-T)}, note that household spend money on imported goods such as bananas that does not depend on their income, that is IM0, but there the rest of the imported goods does depend on your after tax income, such as a trip to the US.

Therefore, if you take into account we do pay taxes and buy imported goods the Multiplier = 1/{(mpc-mpi)*(1-t)}

If you run the numbers through it will be LESS THAN 5.

Now, I have simplified the real word case, but in actuality, the BANK OF CANADA calculates the Canadian Multiplier using approx. 1000 formulas that takes into account almost everything and when doing so the Bank of Canada calculates an expenditure multiplier between 1 and 2, but closer to 1.

Finally, if we just have the average household in Lethbridge spend $20.00, this will not have an effect of 5 times. We must realize that we spend AFTER TAX income, and we have to pay GST on goods, and if we spend it on gas, we pay an excise tax to the government. Second the individual may be buying imported goods not Canadian goods.

Therefore, spending $20.00 locally will not generate what your (public service ad) has suggested. This is a one time spending, this will not see a permanent increase in the Canada’s GDP. Rather you are taking your after tax income to spend on goods that already exist in the economy, it will be a one day blip, that will not realize an ECONOMIC BOOST! Households must continue to spend and increase spending to see any effects in the positive direction.

If you have any questions, or would you like to chat, by all means give me a call or e-mail. I would be happy to discuss this issue.

In forwarding the interchange along, Reid added: "I'm glad I'm in radio and the toughest math I have to do is figuring out song rotations or my Can. Con. numbers. ; >"

All I can add to THAT is: in this economy, we're all being forced to learn more economics than we ever thought we would need to.